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Big Banks Looking into Wearable Banking

While retailers change their cobranded card issuers periodically (and sometimes the network brand on their cards), the event is usually noted just in the trade press. In New England, where both LL Bean and Bank of America share high visibility, L.L. Bean’s switch to Barclay’s from Bank of America continues to have a high media profile some five years after the split.

From the Boston Globe:

The split between Bank of America and L.L. Bean appears to have been particularly acrimonious. L.L. Bean, based in Freeport, Maine, originally hired Delaware credit card giant MBNA in 1996 to run a co-branded card. But L.L. Bean said it received a growing number of complaints from customers after Bank of America bought MBNA in 2006.

L.L. Bean ended the agreement in June 2008 and tapped British financial giant Barclays to take over the business. Bank of America, however, decided to keep the old L.L. Bean branded card accounts open. And when those cards were about to expire, Bank of America issued replacement cards with a mountain scene similar to the one on L.L. Bean cards.

The Charlotte, N.C.-based bank even used the image of a hiker on a mountain top carrying sporting goods gear in related promotional material.L.L. Bean was so aggrieved that it filed a lawsuit in federal court accusing the bank of deliberately trying to deceive customers. Bank of America denied the allegations, including the suggestion that L.L. Bean had exclusive rights to “mountains or mountain scenes.”

In 2009, a judge declined to order Bank of America to cancel the old L.L. Bean cards, ruling there was “room for reasonable minds to differ” over the meaning of the contract. Both companies ultimately agreed to take the matter to arbitration.

Neither Bank of America nor L.L. Bean would say how the arbitrator ruled, although L.L. Bean said most of the customer confusion has subsided. And a Bank of America spokeswoman pointed out that its cards are “clearly marked with the Bank of America brand” on the front and back.

Deal terms indeed are at the heart of such agreements (and disputes). Issuers may retain the ability to issue cards to the existing customer portfolio under some contracts, even if the agreement lapses. In such cases, the issuer usually attempts to map the customer to the closest available card product in terms of its features in order to maximize chances for cardholder retention.

Unknown, of course, is the degree of cardholder confusion that may ensue should a cobranded program unravel. Cardholders may not appreciate the fact that the retailer is not the issuer, but rather is the bank partner. And just to make things even more complex, it is well know that some consumers think the card is issued by the network (i.e. Visa. MasterCard).